Changing the world through generosity of spirit
Podcast transcription - 15th may
Alan Cowley: Welcome to the Invested investor. I'm sat opposite Suse Reynolds. Suse has a passion for Angel Investing which has led her to sit on the board of the Wellington region’s Angel Network, the Angel HQ, and is the executive director of New Zealand Angel Association. So a degree in law, yet a life in Angel Investing. How did it all begin?
Suse Reynolds: Great question. I was going to tell the God's honest truth about why I'm sitting here in front of you, doing what I'm doing now. And I thought, "Oh, what the heck?" So, I've had this weird thing since I was quite a small child, as lots of small children, especially girls, I think, seem to have, "I wanted to save the world." And so, my route to that was a pretty specific goal, and I was going to be President of the United Nations. I thought that would do the trick in terms of stopping all wars. Pretty rapidly, became aware that that was a ted ambitious. Although when Helen Clark, our prime minister came very close to that role and I worked in diplomacy for a little while and throwing a few aeroplanes and things with her, and I did think at one stage that if she got the gig, I was going to write to her and say, "Look, you have got my job. It doesn't matter. I'll be perfectly willing to come and help you out. I can be on your wing."
Alan Cowley: Yeah, I'm sure you could take over from her afterwards as well.
Suse Reynolds: Exactly. But yes. As I say, I got a little bit more grown up, slightly less kind of idealistic about the whole thing, and I did have a career in diplomacy for about a decade before I got into this. And I worked in trade policy, texts agreements, internationally, services agreements, those kinds of things and world trade organisation. And that Gig led to working for our foreign minister for a little while, for about three and a half years. Best job. Ended up being press secretary for him for a little while, and then back in foreign affairs and it got a posting to London. And again, very trade focused helping New Zealand gets spreadable butter into the UK and making sure our access into Europe for lamb and all that kind of thing was coming. But actually, in the course of that role, super, super lucky, great place to live, had a tiny baby in London.
Suse Reynolds: But I started to get ... And it sounds awful, but I started to get a bit bored, as seemed just kind of so far away from the coalface negotiating international trade agreements. And I couldn't kind of see how it was deeply relevant to getting New Zealand kit across the globe. And so sort of shortcut back to New Zealand, resigned from foreign affairs. And I quite often say to people just fundamentally, because I couldn't put exclamation marks after things as foreign affairs was just not that kind of place so much. And had another tiny baby. And then as the world works was wooed back to economic development by a former foreign affairs colleague who was head of our economic development agency in Wellington. And in the course of trying to figure out how I could add a tiny bit of value to that role, my job title was general manager of investments. My key performance indicator was to substantially facilitate "$10 million of foreign direct investment" into the Wellington region. And at the same time, a lovely colleague or former bud from university keeps saying to me, "Suse, Wellington needs an angel network. You should get cracking and set one up." And that sort of lined up neatly, I was getting info back from people I was talking to when I was trying to figure out how to add this bit of value. Wealthy people who were talking about the fact that they were being pitched for deals a lot, they had no idea how to vet them. And there was everyone from sort of property investors to a senior, professional service providers. And so, a friend and I sat together one February, he was working in the incubator, which was part of the economic development agency. Me doing my sort of general manager investment thing and we decided, right, let's set up an angel network this year.
Alan Cowley: So, did you know what an angel investor was at this stage?
Suse Reynolds: Not Really, I mean, I didn't know, what angel investing was, going into that role. This was probably, what was it, 12 years ago, I guess now, 12, 15 years ago. And it was certainly not a formally recognised endeavour in New Zealand. There were some guys who had recently benefited from a big exit, Trade Me, which is like eBay kind of stuff, which had just been sold to Fairfax for hundreds of millions, and they were kind of getting started in the space. And I remember going to talk to them and just thinking they were so incredibly cool and so incredibly brave. But they didn't really call themselves angels a little bit. Actually, my first entree to angels was Bill Payne and he was coming to New Zealand. And a guy called Andy Hamilton was running Ice House, affiliated with Ice House in Oakland. Livewire huge, huge heart for this kind of space and he was terrific. Really kind of got on my wing too, to help us do this. But we were unique again, and setting up an angel network from a local government kind of base. So you can imagine literally I heard, I don't know, at least a dozen times, why would we do that? Why would we help rich bastards get richer? And that just made me smack my head on the desk because it's just completely misses the point because as we all know, mostly angels don't get richer, at least not terribly quickly.
Alan Cowley: Have fingers crossed.
Suse Reynolds: Yes, we do. Actually, that was the wrong thing to say. Absolutely we do. But yeah, so it took some doing to get some support for setting up an Angel Network, which we did. It was a business unit of the economic development agency for a little while. And here we are 10 years or so later, completely, separate, entity, nice balance sheet operating out on its own. An incorporated society. 80 plus members, over 20 million nudging, sort of 25 million invested. We've had half a dozen exits and the last sort of four or five years. And as a club, Skype factor we're in the black as an entity, not all our members individually, we're kind of proud of that. And I don't want to ... It's probably more wide good luck than good design. We've been very lucky with our first core of members that they are experienced, dedicated, giving, incredibly clever people. So there's been really good too.
Alan Cowley: That is good.
Suse Reynolds: So yes, long-winded response to your question about how I got into the space.
Alan Cowley: What attracted you to Angel Investing in the first place?
Suse Reynolds: Well, back to my kind of slightly idealistic thing, and I went off on a tangent there, but the reason I love Angel Investing is because I do fundamentally believe, the more we trade together, the less likely we are to kill each other. And Angel Investing particularly in New Zealand and for you guys in the UK to a large extent, you're not going to create a big market in your own backyard. So that appealed to me, big time. The second driver for me is that I am really proud of the Kiwi emo, and even when I was working in diplomacy watching New Zealand peacekeepers and see it around the world, they have a unique ability to get along with the world and create value and be good players wherever they are. So, I'm passionate about getting New Zealand stuff, New Zealand out to the world. Somebody articulated it beautifully six months ago, so I can't claim credit for this, but I think New Zealand's USP is we do empathy really well, and that's really powerful when it comes to scaling, impact and making a difference. It also means that we have a real kind of affinity for people in the planet. And that makes scaling and growing businesses, I don't know, more sustainable, more inspiring. But it also means that when you're negotiating exits or you're trying to grow our customer base, we have this kind of, I thought it was kind of USP that we can get inside other people's heads and really figure out what's going to work for them. And you saw it and again, I feel like I'm sort of showing off a little bit, but watching Jacinda Ardern, she personified it, when we had that terrible, tragedy, in Christchurch a month or so back.
Alan Cowley: A good balance between IQ and EQ.
Suse Reynolds: Yeah, and a good balance. I often say, and I might be skipping ahead to one of your other questions perhaps, but for me, when people ask me what success looks like for Angel Investing in New Zealand, I say in the next few years, I want us to be generating 5 to 10, $100 million exits a year. And that's not just because of the financial returns, we need those for this to be sustainable. But actually, those are proof points of value that we are creating stuff that people want to buy around the world. That's pretty cool.
Alan Cowley: Yeah. So do you remember your first deal?
Suse Reynolds: Yeah. Oh my God. Yeah. Oh, seriously. On all sorts of runs. My first deal was a little bit of coin and I referred to investing visiting what I call my two packets, a, chocolate biscuits, worth, because I would love to. This is we bit of jargon, but I would love to democratise Angel Investing. I want it to be accessible to everybody because I think not only does it do those things that I was talking about before, in terms of making us less likely to kill each other, but also, it's such a neat way to sort of generate financial literacy and understand how business models work. I want my kids to be part of doing this. But yeah, so I invested in a company called Sugars Mode. It was a woman founder and she was my colleague who helped set up Angel HQ. And so it was kind of cute. She set up a start-up, and I went off to do the angel investing thing and we've sort of kept going down that track. So yeah, there was my first one, super proud to enlist her business, she's a rock-star chick, one of those, gets stuff done, to do lists, and they are all done by the end of the day. I can take 20 minutes to write a two, paragraph email and she takes two and a half minutes, and that's just as gorgeously crafted as I would do.
Alan Cowley: So, you touched on accessibility for angel investing. What's the crowdfunded scene like in New Zealand?
Suse Reynolds: Ah, yeah, great question. We've got three or four crowdfunding platforms, and they're doing really well. Snowball effect is completely kiwi based. It was a crowdfunding platform that started because Australia hadn't set up the regulations to do it. In Australia they wanted to kind of get a running start edit. And they're now doing really well in Australia and New Zealand. And PledgeMe is run by a fantastic woman called Anna Guenther, and she calls herself chief bubble blower. And PledgeMe is now doing not only equity crowdfunding, but also debt crowdfunding as well. So yeah, those are the sort of key players there. I mean, I think Crowdcube has a presence in New Zealand and two or three others in a smaller scale kind of way as well.
Alan Cowley: So, you think crowdfunding is a good thing?
Suse Reynolds: Yeah, absolutely. It's a pie that we can all grow. It's an overused phrase, but the ethics class kind of knowledge curve for this kind of thing. Yeah, it's an asset class and just relatively new, and there's plenty of start-ups and there's lots of high risk and so I'm always super conscious of making sure that people get there. I mean, people listening to this, of course, we'll get that. But yeah, it has to be money that you can afford to lose in this early, early stage.
Alan Cowley: Okay. So let's talk about some of the pains that you've experienced in your Angel Investing, and then we'll go into some of the successes.
Suse Reynolds: I must admit, I haven't personally experienced pain and that kind of sense. I've lost money in Angel Investing, but in both those instances, they were done with a kind of dignity and grace and full transparency, brave decisions made by investors and founders that this wasn't going to fly anymore. And I would back both of those founders again in a heartbeat if they were firing something up again.
Alan Cowley: Elegant failure.
Suse Reynolds: Elegant failure.
Alan Cowley: Elegant failure.
Suse Reynolds: Yes, that's a lovely phrase. Yeah. And as John Houston refers to it, you've no reputational loss for anyone. In fact, everybody's reputations, I think, if anything is, enhanced by the experience. And I also wish we would talk more about it and be more, proud about it and more honest. In fact, I said it at a gig the other day, that honesty is one of the most precious commodities in our space. Brave, honesty, and kind honesty. If we did that a bit more, they'd be less angst about it, I think. Yeah.
Alan Cowley: So yeah, those are the pains on the financial side, but is there anything that kind of pains you about the process or anything about Angel Investing that could change?
Suse Reynolds: Yeah, like any part of business life, there are personalities and personality profiles that are challenging to work with. And I've seen people struggle with that. I don't think we should dodge the painful aspect of Angel Investing. Of course, it's enormously rewarding and it's a huge buzz. But personally, it can be so confronting. It can be so challenging when they are in small start-up teams, when there's fallings out, when you are dealing with personalities that are just differently wired, people who, for lack of a better way of putting it, the essence of Donald Trump, where it's just a tension and there is no rationalising emotionally or intellectually to kind of get a founder to sort of see what actually might be a more constructive positive, route out of a problem. When you're dealing with those kinds of founders it's exhausting, energy-sapping, emotionally challenging. That's gnarly, gnarly stuff. Yeah.
Alan Cowley: You've spoken a little bit about what kind of interests you, but what excites you about Angel Investing?
Suse Reynolds: I really do believe it has the power to change the world. But the gorgeous, gorgeous things and the thing that we are so lucky about is that we get to see first off the disruptive business models, services, biotech, you name it, that's coming down the turnpike towards us and be alongside the hugely brave individuals who are carving out new markets, forging new paths. I mean, yeah, that's what's exciting about it.
Alan Cowley: It’s just a hugely exciting space, isn't it?
Suse Reynolds: Also the fact that we kind of get this feeling, in some ways we're at the vanguard of changing the whole way economies, that you and I were touching on before we got started, on capitalism and how capitalism is not actually taking the world forward massively. I often quote the fact, I don't know about the rest of the world, but certainly Angels in New Zealand, research says 80% of any exits, the returns from exits, go straight back into start-ups. So, the notion of generosity of spirit, optimism, and creativity. That's seriously cool. And the whole thing about how we've got to find better ways of living on this planet and Angel investing is at the front of that and be it life sciences or cleantech or whatever it is. We get to that, cranking out of the gates.
Alan Cowley: Yeah. I was chatting quite a lot yesterday about how Angel investors are exactly the forefront of it, but also there's a lot of companies out there that, maybe if they'd gone for Angel Investment, what would we see? Yes. It's really interesting. I've got a random question for you here. What's your favourite Angel investing term or words or worst?
Suse Reynolds: Oh, my worst. And I hope and you found us with listening going, "Oh shit," but it's that, "Please come on this journey with us if you're interested in this thing, come on this journey with us." Can we knock on any more journeys? So that's probably one of my worst. What's my favourite? I can't think what a favourite is right now. I'd have to think on it for a bit longer.
Alan Cowley: Okay, I'll leave that. All right, so let's move on to entrepreneurs. What does your ideal entrepreneur look like?
Suse Reynolds: Big Question. I don't know. I mean, we have been lucky enough in New Zealand for the last couple of years to have a guy called Randy Komisar who's one of the senior advisors at Kleiner Perkins come and be with us. He looks for founders who have a chip on their shoulder, but by chip, he meant somebody who's got something to prove and is just so driven by that. But what fascinated me about him and people like your dad is that they have been doing this for so long, it's almost kind of cellular as kind of subconscious. They can see which founders are going to harm and which aren't. And so articulating exactly what it is you could talk for seven and a half minutes about all those sorts of things, that you look for. And so I guess, I have a very sort of base level of that now. I feel lucky enough that I've been doing this for 10 years or so. And you do sort of see the founder with the x-factor and those are founders who have an ability to kind of be in a lift and it turns out there standing next to so and so who's head of such and such, who connects them to something. So those kinds of founders, people who the universe seems to be smiling on. I love them and the ones who are just, you can see it's a mission. Yeah.
Alan Cowley: That also takes effort though to be in the right place at the right time.
Suse Reynolds: Totally, I mean, whenever anybody says, Oh, they're just lucky, he said, yeah, but luck takes work, it is also about timing and it's also about hard work." And I liked that. I liked that a lot. And you can see that. And founders that you talked to who have just, they put in the hours.
Alan Cowley: No, no, I completely agree. So you’re getting a pitch from an entrepreneur and you kind of gauge what sort of person they are. How do you scale the idea that they're pitching to you? How do you kind of judge that? Is it a guessing game?
Suse Reynolds: I think it's a bit like, I love the whole notion that, I don't mean to this to undermined or sound sort of disingenuous, but there's an element of when an investor sees a pitch, they know within like three or four minutes, if it's something that lights their fire and then they'll spend the rest of the time sort of justifying it by due diligence or whatever else. And it’s the same if you're buying your first house, you walk into it and you think, "Oh, I just have to have this house." And then you spend the next kind of six weeks doing your builders reports and doing all that kind of stuff. I think it's justifying why you should buy it. But that said, the founder, of course, we all sort of talk about the team is everything but product-market fit is the biggie. So that's what I look for after I've kind of been completely enamoured by the founder's enthusiasm and whatever they're doing to kind of try and save the world.
Alan Cowley: How do they prove that to you?
Suse Reynolds: Whether it's like very early stage, they can articulate how they're going to suss that out and ideally they'll say things like, I'm going to stand on a street corner and I'm going to talk to 50 people who walk pass me to see what they think about this idea and if they'd buy it and how much they'd buy it for. I'm going to run 12 focus groups and talk to people. So just their whole approach to how they're going to figure out and that whole notion of, I know we're not really meant to square but just sell it, don't be kind of fiddling around in your petri dish forever getting it perfect. Perfect, perfect, perfect. And I look for that. That's one of the next things I look for because you've got to find that market. It doesn't matter how cool what you are producing is, if somebody doesn't want to buy it. Tricky.
Alan Cowley: There's a great story in the UK of the guy carrying around antibodies and just trying to sell them to people at the science park.
Suse Reynolds: It's really, great. You're going to love these, look there's a purple one in here as well.
Alan Cowley: So, you've got experiences, names to invest in, we’ll would go on to Angel investing in New Zealand in a little bit. What do you think makes you an expert or do you think you're an expert?
Suse Reynolds: Oh God no. And in fact, I've been trying to kind of get over this, but I have imposter syndrome, I know it's incredibly self-involved and I need to get over it and it's just a waste of time and it's all about me. The thing I am least afraid about saying is I'm good at, is I love connecting people. I love cheerleading for great ideas. And I think I've got a pretty decent vein of common sense. I've been lucky enough to hang out with incredibly clever people, who've done great and groovy things and I'm really, really happy to pay for that forward, which is partly why I must admit, getting into actually writing checks and being an Angel investor in the last four or five years, I felt like I've owned that. I've been lucky, it would be such a waste if I had done that first five years of helping to set up Angel networks and being part of the Angel Association New Zealand not to have “woman-ed up” and got stuck in. And as I've said to lots of people, I think the primary way you learn in this space, but like Montessori on steroids, you've got to do it. Reading a gazillion books. It's a bit like saying to a founder, just get out and sell it. Same thing as an investor, stop hanging around on the side line thinking, maybe I will and or perhaps, you just get in there.
Alan Cowley: Take the plunge.
Suse Reynolds: Take the plunge. Yeah, yeah, yeah. It's good fun.
Alan Cowley: Let's move on to Angel Investing New Zealand. You are the executive director of New Zealand Angel Association. What's the scene like in New Zealand? How many groups are there? What's the kind of the vibe? The culture?
Suse Reynolds: Yeah, I mean we're slightly over-enthusiastic, I think in New Zealand I was talking to a guy from Irish Angels were about the same ... We're about 5 million people in New Zealand, little under really, we were there about 700 angels. Actually, we're probably nudging 800 angels and about a dozen networks, which is a little extreme for a long, skinny country that's got only 5 million people. But we played together quite well. We have a monthly call where we all get on Zoom and chat about deals coming in and deals going on with others. So that works well, we syndicate about, between sort of 60 and 75, 80% of the deals that we do between each other because New Zealanders are not wealthy, but we are very enthusiastic Angel Investors. In fact, we are sort of start-up genome, recognises that if you start up a business in New Zealand you are very likely to get Angel investment, but that means that we have a real gap for a follow on. So just to finish off on the steps thing, this year we've just ticked over 100 million per annum and to angel deals about a hundred deals a year. 30% of those are new deals and the rest are follow-on, which reflects where we are in the market as well. And classic in terms of sectors, ICT, and SAS, then biotech and life sciences where we prefer to invest. And then our average deal size is about 900,000 Kiwi dollars, at the moment.
Alan Cowley: So, is there anything that needs to change? Sounds quite pretty at the moment.
Suse Reynolds: We're lucky. But yeah, the things that need to change are, we need to keep gunning for exits. We've had six or eight in the last two years, which is good from 2X to a sort of 14, 15 X and those are all in a relatively short time frame. So I imagined they'd tick the IRR box as well. But we seriously need to get amongst that series in New Zealand and there are rumours afoot at the moment. Our government's budget will be announced at the end of May and there are rumours that there is going to be some intervention by the government to help us with that.
Alan Cowley: Is there any government intervention tool?
Suse Reynolds: Yeah, we have a matching fund, SEEK, investment fund. But up until a couple of years ago, they would match dollar for dollar up to about 750k, but now the mandates expanded, they can go up to 2 million and they are just a syndicate partner. They just invest in their own right. It's an evergreen fund. Yeah. And huge credit to them and huge credit to New Zealand trade and enterprise. They have been right on our wing as an industry and as early-stage investors to help get this humming and going. But we now need to sort of love up the VC space to make sure that all those deals in the pipeline have some solid ... but, for me, critical, critical point. It is not just about the coin, it's about connections and capability that come with that. And so I freaked a little bit if suddenly somebody, a big sugar daddy or sugar government said, "Here's 500 million, knock yourselves out." And we could easily waste a third to a half of that because we're still coming up to sort of the maturity kind of thing with the capability-based. We've got some great capability. I'm sure we would do well, but we need to be very conscious of that.
Alan Cowley: Okay. What else does these exits come from then are they abroad?
Suse Reynolds: Yeah, US and UK based pretty much. Yeah. I don't think we've had any sort of Asian or even Australian exits. Most of them are US and UK.
Alan Cowley: That's interesting. Okay. So we'll change direction a little bit here. What do you wish you'd known when you started out Angel investing?
Suse Reynolds: I wish somebody had sort of shoved me in the middle of my back and made me start writing checks sooner. That's what I wish I had known. What else do I wish I'd known? I think if anything not being afraid to ask, but then when I say that people are so generous anyway. So in some ways when you're in the Angel investing space, you almost don't have to ask because people are happy to tell. So yeah. So that's good.
Alan Cowley: So, advice is that?
Suse Reynolds: Advice, yeah, absolutely. How do I do this? Don't be afraid.
Alan Cowley: Okay. Yeah. And finally, what are you curious about? New prospects, the new big thing in New Zealand? What excites you?
Suse Reynolds: I mean, the benefit of being in the role I am is, I'm really curious about the point that we talked about earlier, about how, scaling impacts, it's going to morph and change and how we do that. And I think there's an element of whether or not unicorns, our obsession with unicorns and our obsession with massive financial returns and this sort of blurring of impact investing, even here in Chicago at this ACA conference, impact investing as a separate stream. And I think we're going to see that kind of blur a little bit more. I think we're all going to get more kind of concerned about seeing not just financial return but, returns in terms of looking after each other better. Yeah.
Alan Cowley: Okay. Brilliant. All right, Suse, it's been absolutely amazing to hear more about New Zealand Angel Investing, and I wish you all the invest in the future.
Suse Reynolds: Thank you it was lovely to talk to you too.
Alan Cowley: Amazing, cheers.
Suse Reynolds: Cheers.
Peter Cowley: Thanks for listening to another invested investor podcast. You can subscribe to all future podcasts via our website investedinvestor.com or via a number of podcast platforms online. Remember, you can order our book online and be sure to follow us on Twitter, Linked In, and Facebook to get the most up to date, interesting and insightful content from the invested investor.